Brussels, June 16, 2006, David Gow (The Gaurdian)

A month ago, the world's largest passenger plane, described by one over-excited spotter as "bloody enormous", made a triumphant debut at London's Heathrow. Now, in two days, the double-decker A380, which can carry 840 passengers, has fallen to earth. EADS, majority owner of the superjumbo's maker, Airbus, lost €5bn (£3.4bn) or a quarter of its market value this week.

Fresh delays to the A380's delivery timetable may be down to temporary problems with the 500km of wiring in each plane, but the crisis at Airbus and its parent, EADS, requires radical surgery that will most likely see the exit of their respective chief executives, Gustav Humbert and Noël Forgeard. And it has provoked a tumultuous row with BAE Systems, which wants to sell its 20% stake in Airbus to EADS for up to £4bn and suspects a plot to lower the stake's value before talks end tomorrow

It is a personal and professional crisis for Mr Forgeard, head of Airbus from 1998 to 2005 and architect of its success in overhauling the planemaker and, for four years, beating its US arch-rival Boeing, which is ascendant again. He is now at the heart of a row over share dealings in March by him, his children and fellow executives, which netted millions of euros and has led to accusations that they knew of the A380's problems long before EADS shareholders and BAE Systems.

The disclosures about Mr Forgeard's stock options are posted on the EADS website under "insider dealing" (sic) and have been highlighted by France's financial regulator, AMF. They show that Mr Forgeard netted €2.5m in exercising one lot of stock options and three of his four children gained €1.4m each in another a week after he acquired 131,000 shares. EADS insisted these 11 executive transactions in March were not informed by the A380 delays, with insiders saying the "earliest inkling" may not have come before April.

Furious reaction

After BAE reacted with fury to the superjumbo's latest troubles late on Wednesday, Arnaud Lagardère, co-chairman of EADS and head of the media group that controls 7.5% of its capital, stuck the knife in. He told Le Monde that investors "lack confidence in Airbus's ability to conclude very complex projects" and, like BAE, he knew nothing about a "major crisis" until very recently. He also announced a full inquiry into the Airbus/EADS management, casting doubt on the future of Mr Humbert and Mr Forgeard.

The loss of credibility at EADS and Airbus, which had been the epitome of European technological and commercial prowess, is acute. Airbus was conceived as a grand European project and symbol of pan-European cooperation. The Franco-German-Spanish EADS had high expectations for the A380 but now several of its 16 customers, which have ordered 159 planes, want compensation and may cancel. That will add to the estimated €2bn hit on profits from 2007 and 2010 from the delays, an estimate that is challenged by BAE.

Changes in strategy have gone along with management rows. EADS and Airbus not only underestimated the technical problems of building a plane in several plants before assembling parts in Toulouse, but misjudged its market - 300 A380s must be sold to break even. Airbus opted for huge planes to fly between big hubs such as Heathrow, while Boeing instead developed the 787 Dreamliner, a smaller but equally fuel-efficient 300-seater. Airbus belatedly responded with its A350 (an updated A330) but wary airlines want a new, fully redesigned version before they will buy.

Sex and sleaze scandals

Ironically, Airbus/EADS took their eye off the ball as Boeing was mired in sex and corruption scandals that claimed four senior executives, including two CEOs. But Mr Forgeard, a confidant of President Jacques Chirac and Jean-Luc Lagardère, Mr Arnaud's late father, misused the vacuum at Boeing to run a brazen campaign, backed by the Elysée Palace, to unseat Philippe Camus and Rainer Hertrich, joint CEOs of EADS -one French, one German - and seize sole control. The Germans, digging in their heels, saw off this conspiracy to turn EADS into a French-dominated group by installing Tom Enders as joint CEO with Mr Forgeard. But the Germans have not forgiven the French and the battles across the Rhine remain vicious.

These disputes are likely to fuel the demands for one CEO and one headquarters (Paris or Munich) within a unified management exercising centralised control over Airbus. That raises the nationality question at EADS, which seeks to list in Frankfurt, Paris and New York, and Airbus.

EADS, despite its €5bn cash reserves, will see plans for expanding its defence business in the lucrative US arms market stymied and an even more aggressive Boeing in the marketplace and at the World Trade Organisation.

The WTO dispute between the EU and US over state subsidies for the A380 and/or 787, now before an arbitration panel that may not meet until 2007, could flare up again if Airbus demands state loans to build an all-new A350 (a move expected at the Farnborough air show in July) because of EADS' profit problems.

Another outcome touted by EADS' advisers is that the A380 - dismissed by a Boeing insider as "a traditional plane: an aluminium cigar-case with wings but huge" - retains its customers and wins over more airlines as air traffic grows. Even Boeing, it is said, sees a market for 500 A380s - even while punting its stretched jumbo, the 747-8. But the A350, already three years behind the 787, is, arguably, an even bigger problem and could come too late to catch Boeing.

For an angry BAE, the prospects are dim. One estimate in EADS circles is that the group's value is down to €16bn so BAE's stake in Airbus would be worth just €2.6bn - a far cry from the €6bn it is seeking. That could undermine its plans to go buying in the US defence sector.

EADS hopes that markets will soon realise their reaction was panicky, the shares will recover and, with luck, no A380 orders will be cancelled. But not too soon, conspiracy theorists laugh.